[opendtv] Re: Analysis: Broadcast's $1 Billion Pot of Gold

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Mon, 14 Jul 2008 09:59:25 -0400

At 9:18 AM -0400 7/11/08, John Shutt wrote:

I have worked in cable. In fact, my first "television" job was engineer at a Public Access studio, but that was many moons ago. However, you being an industry insider, I'm sure you know or can find out the answers to the following three questions:

1) How much does a :30 spot go for on "Deal Or No Deal?"

A bunch.

2) How much does a :30 spot go for on Ice Road Truckers?

A little bit.

3) How much in subscriber fees alone does Discovery Networks pull down each year for The Discovery Channel, TLC, Animal Planet, Discovery Health, The Science Channel, Discovery Kids, Discovery en Espanol, Planet Green, Military Channel, Investigation Discovery, Turbo, HD Theater, and FitTV? You think that maybe some of those channels generate more revenue via subscriber fees than it cost in rebranded and remixed programming, thus subsidizing some of the other ones?

An interesting question. The total is very significant, but much of this subscriber revenue comes from optional digital tiers that consumers can elect to subscribe to.

All large media companies cross subsidize - most popular prime time shows on the broadcast networks are subsidized...by the expected revenues from syndication.

I can assure you that most of the mainstream Discovery channels could operate profitably without subscriber fees.

If ad revenue alone were enough to sustain all those spinoff channels, then don't you think that they would have made additional channels that had NO subscriber fee? Competition is fierce to get onto cable/DBS, just as it is fierce for products to get shelf space in your grocery store.

Why would they do something stupid like this? The NORM in the U.S. is double dipping. Only market forces could change this, and they are insulated from market forces by the actions of government that make the double dipping possible.

Without having to perform a complete audit of the books, we can already get an idea of how much a subscription fee would be if there were no ads. As I said before, look to HBO, Cinemax, and Showtime.

Nobody is talking about AD FREE premium channels here. What we are talking about is advertiser supported channels that also charge subscriber fees. It is ridiculous to believe that ala carte would lead to subscription fees similar to the premium channels, UNLESS the channel owner decided they could make more money dropping the ads all together and only get revenue from subscribers.

As for Freeview, I still contend that it is partially subsidized by the UK television license, which is currently 139.50 GBP (because of the plunging dollar, that is now $276.32) per year per household. At a bare minimum, the Beeb paid for most of the engineering and implementation of the DTV multicast network.

I do not buy this argument. I believe that the license fees are there to keep the BBC free of ads. In this they are more like HBO. The license fees were there before Freeview and Freview will most likely exist AFTER the UK pulls the plug on the funding of the BBV, which is now fully capable of sustaining itself via distribution to global markets.

Individual Freeview channels may also be partially subsidized by BskyB and however many cable systems exist in the UK, to the extent that they receive subscriber fees from those sources. If so and how much I do not know.

It all boils down to ad revenues. The fact that companies other than those that OWN Freeview are paying millions of dollars for access to Freeview and can still make a profit with only the revenue from ads (and syndication in other markets) tells us all we need to know about the lack of need for subscriber fees.


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